Assume that $100 million face value of MBS were used to create the following tranches issued by Quick Money SPV:

Bond Rating	Amount in million	Allocation in %	Risk weights for CAR (APRA APS 120)
Aaa	$ 30		20%
Aa1	$ 20		20%
Aa2	$ 10		20%
Aa3	$ 5		20%
A1	$ 5		50%
A2	$ 5		50%
A3	$ 5		50%
Baa1	$ 5		100%
Baa2	$ 5		100%
Baa3	$ 5		100%
Ba1	$ 5		350%

Assets		Liabilities and equity
Cash	$10	Demand deposits	$90
Quick Money Aaa tranche	$15	Equity	$10
Quick Money Ba1 tranche	$5
Loans (risk weight 100%)	$70

Bond Rating	Amount in million	Risk weights for CAR (APRA APS 120)	RWA in $m for the bank buying the whole tranche
Aaa	$ 30	20%
Aa1	$ 20	20%
Aa2	$ 10	20%
Aa3	$ 5	20%
A1	$ 5	50%
A2	$ 5	50%
A3	$ 5	50%
Baa1	$ 5	100%
Baa2	$ 5	100%
Baa3	$ 5	100%
Ba1	$ 5	350%
Total

b. Show the changes in Small Banks balance sheet once 15 percent of the Quick Money loan pool is written off. Check the impact upon the tranches and explain what problem Small Bank faces.

Continue with your balance sheet from b) after the losses. If Big Bank would swap all its loans against Quick Money A3 tranches, its RWA would change to $___ (no rounding!). Check if Big Bank is now achieving its minimum CAR of 10% again.